By now, operators will have received a letter and information booklet from the CAA detailing the new safety levies that will take effect from 1 July 2017. These levies have been introduced despite efforts by a number of individuals and organisations to enlighten the CAA and Minister of Transport of the failings in the consultation process, as well as the inequities in the methodology adopted.
Immediate financial implications
The levies will be introduced across two financial years (2017-2018 and 2018-2019) with 50% of the full rate payable in the first year and 100% payable in the second year and beyond. For the purposes of analysis, this article is based upon the full levy rate payable and ignores the first year’s sugar-coated Trojan horse.
Certificated operators will no longer be charged at an hourly rate by the CAA for routine inspections and monitoring. They will instead be levied at varying rates as outlined in the following table:
|Sector||Full levy rate|
|Part 115 – Parachuting||$1.60||per descent|
|Part 121/125 – Passenger Air Transport||$5.50||per flight hour|
|Part 135 – Passenger Air Transport||$6.50||per flight hour|
|Part 137 – Agricultural Operations||0-10,000 tonnes per annum||$0.87||per tonne|
|10,000 – 50,000 tonnes per annum||$0.73||per tonne|
|50,000+ tonnes per annum||$0.65||per tonne|
|Part 121/125/129/135 –
|0-10,000 tonnes per annum||$3.00||per tonne|
|10,000 – 50,000 tonnes per annum||$2.60||per tonne|
|50,000+ tonnes per annum||$2.00||per tonne|
Apply the above figures to your operation to determine how much you will pay the CAA under this new levies regime. Compare this to how much you currently pay annually for routine audits and this will tell you whether you are immediately better or worse off.
The longer term consequences
These are numerous. A couple of the more obvious consequences are the loss to industry of the mechanism whereby demonstrated safety performance was financially rewarded via an increased audit interval and a corresponding reduction in CAA charges; and the fact that in moving away from an hourly rate-based method of cost recovery, the CAA has skilfully managed to put itself in a position where its operating costs can’t easily be compared with other similar organisations or government agencies.
Of far more significance, however, is the fact that throughout the process of setting these levies, the CAA was very clear that its objective was to more closely match the revenue recovered from each sector of industry with the expenditure it incurs in regulating that sector. This all sounds very nice as a concept, but an analysis of the CAA’s current sector-by-sector costs and budgeted future expenditure shows what full cost recovery might look like, and the ramifications for commercial general aviation become immediately apparent:
- Regulating commercial general aviation accounts for 23% of the CAA’s total expenditure.
- The CAA’s budgeted total expenditure for FY2019 is $42.818m.
- This means that the CAA’s expenditure on the regulation of commercial general aviation will be 23% of $42.818m, which equals $9.848m.
- Deducted from this is the CAA’s projected revenue from other sources (for example, fees and hourly rate charges) of $1.637m, which leaves $8.211m to be recovered from commercial general aviation by way of levy.
|Sector||Historic percentage of total cost of commercial general aviation audit oversight||Share of $8.211m to be recovered if 100% cost recovery principles applied||Levy rate required to achieve 100% cost recovery|
|Part 115 – Parachuting||11.3%||$927,843||$11.94 per descent|
|Part 121/125 – Passenger Air Transport||11.6%||$ 952,476||$25.15 per flight hour|
|Part 135 – Passenger Air Transport||25.4%||$ 2,085,594||$29.78 per flight hour|
|Part 137 – Agricultural Operations||34.7%||$ 2,849,217||$3.99 per tonne|
|Part 121/125/129/135 – Freight Only||17.0%||$ 1,395,870||$13.75 per tonne|
In terms of the way the Government sets fees and charges, there is nothing to prevent the CAA moving to a 100% cost recovery methodology. You will be able to assess the impact on your business, but it doesn’t take rocket science to also imagine the implications for the entire commercial general aviation sector.
Can this be challenged?
Yes it can. Four avenues have so far been identified through which various aspects of this levy can be subjected to scrutiny. These range from the veracity of the consultation process, through to the selective targeting of the levy, its longer term implications, and compliance with government guidelines and the Civil Aviation Act itself.
This isn’t going to be an easy process. It will involve significant research and analysis coupled with engagement in the political arena to maximise the chances of success. Any such challenge needs to be mounted now, before the levies are cemented in place.
The estimated cost to mount a credible challenge will be around $20,000.
The next step
If you have any questions, or would like to support the effort to overturn this parasitic threat to the future livelihood of commercial general aviation, please contact Qwilton Biel.
Phone: (027) 493 5655